Statoil to lobby Norway to change offshore shifts to cut costs

As part of an effort to reduce well costs 25% by 2020, state-controlled Statoil plans to lobby politicians and regulators on offshore worker rotations and health, safety and environment regulations, the Stavanger-based company said in documents seen by Bloomberg.

Most rig employees working off Norway spend two weeks on the job and four weeks off. That compares with two to three weeks on and two to three weeks off in the UK. In Norway, normal shifts don’t exceed 12 hours a day and 33.6 hours a week, according to a government report on the industry.

The company will “initiate work aiming to close gap to UK on rig day rates” that’s about $100,000, it said in an internal presentation. Those efforts should go “through long- term collaboration with state,” Statoil said.

Costs in Norway’s offshore oil and gas industry have risen by about 10% a year during the past decade, in part because of drilling expenses. The government-commissioned report in 2012 said well costs were among the world’s highest and at least 40% higher than in the UK.

To maintain production after a 20% drop over the last 10 years and avoid leaving resources untouched, Norway should address labor costs and simplify rules and requirements for offshore rigs to close the gap with its neighbor, said the report, written by a team led by former Norsk Hydro ASA CEO Eivind Reiten.

While Norway’s Conservative-led government will consider aligning rig requirements with the UK, any change in the organization of shifts and wages for offshore workers should be addressed through talks between labor unions and employers Norway’s Petroleum and Energy Minister Tord Lien said in an interview in February, echoing his predecessor Ola Borten Moe.

Before the Reiten commission presented its report, the representative for Norway’s biggest offshore-worker union, Industry Energy, quit the group to protest its recommendations.

Industry Energy and other unions are currently facing public mediations on four separate collective-bargaining agreements in the oil industry after negotiations with employers broke down over wages and other issues. If the mediations fail to reconcile the parties, strikes could affect Norway’s oil and gas production two years after the longest oil-worker walkout cut output before the government used its right to intervene as oil companies threatened a total staff lockout.

Statoil plans to cut drilling costs are part of a wider efficiency program that reaches across the organization as the company plans to increase pretax cash flow by $5 billion by 2020, the documents show.

Statoil in February said it was shifting its focus to improving returns that have been falling over the past years as costs rise and the price of oil stagnates. The company’s 2020 efficiency program goes beyond a public announcement to cut planned investments for the the three years through 2016 by 8%.